Direct sales or independent networks: The dilemma for life and health insurers

The Canadian individual life and health insurance industry is at a crossroads. On the one hand, digital pressure is pushing insurers to modernize the customer experience and explore online direct sales. On the other hand, the traditional distribution model through independent advisors and brokers remains dominant and, for now, largely successful.

This dilemma isn't just technological.

It's strategic, cultural… and generational.

Digital ambition that's slow to bear fruit

In Canada, several insurers have tried to implement digital direct sales models, inspired in particular by international players like Lemonade and Haven Life. Yet, despite significant investments in user experience, underwriting automation, and digital marketing, volumes remain modest compared to the traditional channel.

Why?

Because life and health insurance is not a trivial product. It touches on financial planning, taxation, estate planning, and family protection. These are complex, emotional, and significant decisions. Canadian consumers continue to place a high value on personalized advice, particularly for large insured amounts or sophisticated needs.

The promise of "insurance in a few clicks" works for simple and standardized products. But the heart of the market, the part that generates the highest premiums, still relies on the human relationship.

The strategic importance of independent networks

The Canadian model is largely based on independent distribution networks. Unlike some markets, such as Europe, where insurers have more control over their distribution, here, the majority of advisors have the freedom to offer products from multiple insurers.

This creates a unique dynamic: the insurer does not have complete control over access to the end customer. They must convince the advisor before convincing the insured.

Investing heavily in direct sales can then be perceived as a way of distancing oneself from the intermediary model. For an established insurer, launching a digital transactional platform therefore raises a delicate question: how to avoid weakening the relationship with its distribution partners?

The risk is not theoretical. An advisor who perceives that an insurer is competing with their role could simply redirect their business to another provider. In an already highly competitive environment, network loyalty is a strategic asset.

A silent generational clash

Adding to this dilemma is a major demographic challenge: the average age of advisors is increasing. The industry is struggling to attract and retain a new generation of talent.

Young professionals are drawn to technology sectors, innovative business models, and environments perceived as dynamic. Insurance, often associated with cumbersome administrative processes and outdated tools, is struggling to appeal to them.

Ironically, insurers are hesitant to radically transform their models for fear of destabilizing their existing networks… even as these networks are gradually shrinking with the retirement of many advisors.

We are therefore witnessing a contradiction built into the business model:

• Modernizing too quickly could alienate the existing network.
• Modernizing too slowly could jeopardize the future.

The false opposition between direct and intermediary

Perhaps the real issue lies not in the choice between direct sales and independent networks, but in redefining the role of each.

Digital transformation should not necessarily aim to eliminate the intermediary. Rather, it can enhance its capabilities.

Digital platforms can:

- Simplify information gathering and pre-qualification.

- Accelerate underwriting through automation and alternative data.

- Offer clients greater transparency regarding their file.

- Enable hybrid interactions (video conferencing, electronic signatures, client portals).

In this model, digital technology becomes a lever for efficiency and attractiveness for the advisor, rather than a competitor.

Some Canadian initiatives, such as those of PolicyMe, demonstrate that there is a market segment for a simplified direct approach. However, these models primarily target standard needs and specific client groups. They do not entirely replace consulting integrated into the sales process.

A question of strategic segmentation

The real choice is therefore strategic: which segments justify a direct approach? Which segments require in-depth human support?

A differentiated approach could consist of:

• Offering simple products directly, with limited amounts.
• Maintaining distribution through advisors for complex products.
• Implementing mechanisms to protect territories or share revenue to avoid conflicts between channels.

This omnichannel approach, however, requires significant operational maturity: lead management, sales attribution, commission harmonization, clear governance, etc.

Without consistency, the risk of internal cannibalization becomes very real.

The real challenge: mastering the customer relationship

Ultimately, the issue goes beyond the sales channel: it concerns ownership of the customer relationship.

In a model dominated by independent advisors, the relationship largely belongs to the intermediary. The insurer is merely the product manufacturer.

However, in the age of data and customer experience, this distance can limit the ability to innovate, personalize, and build loyalty.

Insurers who succeed will not necessarily be those who have prioritized digital or independent networks, but rather those who have clarified their value proposition:

• Being an efficient manufacturer?
• Having the best technological platform?
• Having strategic distribution partners?
• …or perhaps, having a strong brand image with the general public?

Conclusion: A fragile, but strategic balance

The dilemma between digital direct sales and independent networks cannot be resolved with a simple black-and-white choice.

It requires in-depth strategic thinking about segmentation, channel governance, and the evolving role of the advisor.

In a context of aging networks, technological pressure, and evolving consumer expectations, inaction likely carries more risks than transformation.

The question, therefore, is not "Should we sell direct?" but rather: How can we modernize without fracturing our ecosystem?

This is probably where the future of individual life and health insurance in Canada lies.